Comparing Electricity Rates in Texas: A Homeowner's Guide
Since energy is deregulated in Texas, when you are setting up an electricity plan you need to choose a Retail Electricity Provider (REP). There are many REPs in the Lone Star State, all of whom want your business! So how do you make the decision that’s right for you and your family, your lifestyle and your budget? Read on for tips and insights into how to navigate the options.
Overview of Electricity Rates in Texas
Here’s how it works: the energy you pay for every month comes from a Transmission and Distribution Utility (TDU), which generates the power, maintains power lines, and services the grid. However, you also have to pay for delivery of that electricity to your home. For this step, the REP that you select buys energy on the wholesale market and sells it to you.
So our first pro tip is to double check that the rate you are paying is the total cost of energy + delivery.
Factors Affecting Texas Electricity Rates
For 1,000 kWh of monthly energy usage, the rates in Texas range from around 12-14 cents per kWh. The first thing that causes them to go up or down is the weather: rates typically climb in the summer heat, when demand for electricity to run air conditioning is high, and fall when things are cooler in the fall and spring – then rise again if a cold winter drives demand for heating. Higher demand causes higher prices on the wholesale market.
The demand for energy is also increasing because more people are moving here – and we don’t blame them! It’s a wonderful place to live, and clearly many people agree. According to the 2000 United States census, the population of Texas in that year was around 20 million people. By 2021, our population grew to more than 29 million people, an increase of nearly 50%. There are more Americans moving to Texas than to any other state except Florida. This boom in population means that power generation across the state has to work harder to create enough energy. And again, higher demand also prices.
Another factor impacting the cost of energy is that the majority of the electricity generated and used in Texas comes from natural gas, and the price of gas varies based on supply and demand. Nuclear, solar, and wind energy are also major contributors to our energy production, and as our capacity to generate these types of power grows, prices could decrease.
Understanding Different Electricity Rate Structures
When you’re ready to start choosing a plan, you have three options: fixed, variable or indexed rate plans.
Fixed rate plans are based on the predicted amount of energy you’ll use every month – enabling you to pay the same rate every month for the duration of your contract (typically 12-36 months). REPs estimate how much they will pay for the electricity they expect you to use, taking into consideration the price of natural gas, weather events, and so on. Then they add a margin so ensure that they don’t undercharge you and lose money. These plans are popular because they allow you to budget for regular energy costs.
If you’d rather have greater control over your power usage and what you pay, a variable rate plan may be right for you. A Time of Use plan enables you to be strategic about when you use big electricity draws like your air conditioning or heating, laundry, dishwasher, and electric vehicle charging. By switching these types of major power consumptions on when rates are lower, you can cut your bill. For more on this type of plan and how it can save you money, read our article on Time of Use Plans.
Indexed plans rates are commercial plans that are typically for large users of energy, such as manufacturers, who want to take advantage of the fact that electricity pricing moves up and down with the energy market.
If you have a credit score under 600, some REPs may require a deposit equal to 2 months of your estimated bill, so you might want to look for no-deposit plans that are available. And prepaid plans not only let you sign up without a deposit or credit check, they let you pay for your electricity before you use it.
Pro tip number two? Whichever you choose – a fixed rate plan for certainty when it comes to your bill, or other options that let you leverage potential savings based on market fluctuations, be sure to carefully review your contract before you sign it, with one eye open for hidden fees.
Comparing Electricity Rates in Texas
Next, you need to know your home’s range of monthly usage. You can estimate this based on past energy bills, which are generally based on 500 kWh, 1000 kWh, 2000 kWh, and so on. Your monthly use will change throughout the course of the year, so it’s good to know your averages over the course of 12 months. These numbers don’t have to be exact, because you’re predicting your usage in the coming year – and unless you’ve made major changes to your home, then last year’s usage should be a good indicator of your future needs.
Pro tip 3: if you have a smart meter, it can help you track your past energy use.
Now you’re ready to compare the total cost of plans. Providers will provide a rate by kWh, and you can make your selection based on the cost. Be sure to understand all of the details, including any additional costs and fees before you sign a contract: review the Electricity Facts Label that providers are required to give you for details such as rate type, percentage of renewable energy, fees for delivery, and more important information.
Common Mistakes to Avoid
Be sure to select a provider with transparent pricing – at Rhythm Energy, not only do we have fair and transparent pricing, we also give weekly usage reports and bill prediction to help take the guesswork out of your electricity bills.
The REP’s reputation (see what we did there?) can also be a deciding factor. Simply put, your provider should be reliable and offer top tier customer service.
Pro tip 4: Find reviews of potential providers; your neighbors who have had good or bad experiences can offer insights into what kind of service you can expect from that REP.
How Rhythm Energy simplifies rate comparison
At Rhythm Energy, we work hard to make sure that your plan fits your budget and your lifestyle. We love it when our customers love the power they get, and control over their bill that they feel, when they switch to Rhythm Energy. Find out what rates are available to you by entering your zip code at gotrhythm.com.
FAQs
How do I compare electricity rates in Texas?
Start by knowing your estimated monthly usage, then compare rates from different REPs. Be sure that the rate includes the price of generation, transmission, and delivery, and watch out for marketing schemes that end up making you pay hidden fees.
What factors should I consider when choosing an electricity plan?
Rate, reliability, and reputation are a good place to start.
Are fixed or variable rates better?
Fixed rates let you have a predictable bill every month, based on estimated usage. Variable rates give you more control over your energy usage, and so over your bill, but they require more effort on your part. Which one you select is entirely up to your preferences!
Can I switch providers without a penalty?
You can switch providers at any time, so you don’t have to stick with the plan you’ve got (or that you inherited from a landlord or previous tenant). Switching won’t cause your power to go out – changing your provider does not impact your service reliability. But note that there might be a fee for breaking a contract that you previously signed.
What are the benefits of comparing electricity rates?
Cost savings are the biggest benefit! But comparing rates and providers also helps you make an informed decision about the kind of plan you sign up for, the level of customer service to expect, and even important factors like the amount of renewable energy that your provider uses to power your home.
